(Image: Private Media)

Australia’s workers have lower real incomes than they did in September 2013 — and they will plunge further after yesterday’s shocking inflation result for the December quarter.

According to Australian Bureau of Statistics data, the seasonally adjusted private sector wage price index (WPI) has risen 16.6 percentage points between December 2013, the first quarter after Tony Abbott was elected, and December 2021. But CPI has risen 16.8 points in the same period, meaning workers have gone slightly backwards in real terms.

Even if we round that up to zero, those numbers are before tax, which means workers are significantly out of pocket in terms of cash in hand.

And with yesterday’s 2.1% inflation rise in March, it means ordinary workers will need a truly stunning wages surge to go close to breaking even in real terms for the March quarter. Even a shock 1.5% WPI rise for the quarter would leave workers on lower real pay than they were when Kevin Rudd lost to Abbott — the last WPI number, for December, was 0.7% quarter on quarter and 2.35% for the whole of 2021.

That WPI number will be released on May 19, just three days before the election — which could turn out to be very appropriate timing.

And under Prime Minister Scott Morrison, workers have made no headway in the three years since the December 2018 quarter, and will end up deep in the red after the March quarter numbers are determined.

This means Morrison will be the first prime minister to see wages materially go backwards on his watch. Since John Howard (the WPI series began in 1997) most prime ministers have presided over inflation and wages coming out about equally. The best performer was Julia Gillard, who oversaw cumulative real wages growth of 0.3% in total. If Morrison loses on May 21, he is likely to leave office with the worst record of all.

Yesterday’s result means that the government’s March economic forecasts for wages are already in danger of becoming irrelevant.

The budget forecasted CPI growth of 4.25% over 2021-22, which means there will need to be a major fall in inflation, to virtually zero, in the current quarter to meet the target. The government is attempting to engineer that fall with its cut in fuel excise (on top of falls in the oil price), but mitigating against that will be a rise in housing costs driven by the expected increase in interest rates for homeowners.

What’s noteworthy about yesterday’s inflation data — and what will alarm the Reserve Bank — is how widespread price rises were. Although housing and fuel led the rises, food, health and education — all crucial items in the household budget — also rose strongly, showing that both goods and services and tradeable and non-tradeable areas of the economy are affected.

Whether the RBA moves next Tuesday or waits a month, there’s no doubt workers with mortgages now face the nightmare scenario of their purchasing power falling materially while mortgage repayment costs increase — and most likely by amounts large enough to inflict real damage on family budgets.

In other countries, workers have banked significant real wage increases since 2018. US workers enjoyed consistent real wages growth from before the pandemic and through it to late 2021, when inflation began rising. UK workers saw significant real wages rises in 2019 and early 2020, and real wage growth — despite surging inflation — has endured even in recent months. This means US and UK workers have a buffer against real wage declines inflicted by the current round of inflation, and also rising interest rates.

Aussie workers, however, have already suffered nine years of zero growth, and are about to lurch backwards in the biggest inflation shock since the GST was introduced.